Credit unions are financial organizations deliberately structured to be different than for-profit firms or government initiatives—“not for profit, not for charity....”
Over the decades, credit unions have been included with other economic entities that call themselves cooperatives.
Fundamentally, cooperatives exist to improve the circumstances of the members they serve. They don’t have third-party shareholders determined to harvest profits from customers. And cooperatives don’t serve as income redistribution instrumentalities, like most government-run programs.
Credit unions were started in a time of significant need: Common workers had little incentive to save and no affordable place to borrow.
Most modern cooperatives have their roots in similar stories about dramatic unmet needs.
- Cooperatives serve more than one billion people worldwide;
- More than 100 million people are engaged as volunteers or staff in cooperatives; and
- American credit unions count almost 100 million members, although multiple memberships reduce that number somewhat.
Notwithstanding, credit unions in this country are a huge component of the worldwide cooperative form of business, at least when measured in the context of the number of lives touched.
The tremendous impact of cooperatives is becoming apparent to policy makers around the globe. The United Nations designated this year as the International Year of Cooperatives. It doesn’t get much more visible than that.
And U.S. credit unions are enjoying a great public reputation, the result of many years of providing good service—all at a time when people are becoming more cynical toward big business and government.
What credit unions do has changed considerably over the years. Technology and new consumer behaviors have required credit unions to adapt to the times.
Why credit unions do what they do remains fundamentally unchanged.
At the end of the day, for credit unions to succeed, they must measure up to the value expectations of their members.
They don’t have to impress Wall Street analysts or deliver 15%-plus return on equity to shareholders. And they shouldn’t have to be overly concerned about peer ratios in financial performance reports (this, of course, has its limits).
Credit union boards of directors should make sure their credit unions provide value to the members they were elected to represent. They also must prudently manage return and risk to benefit members.
The events of the past decade—real estate bust, Wall Street greed, government largesse, dot.com bubble burst, debt accumulation, privacy invasions, fraud, and the worst recession in a lifetime—all illustrate the value and importance of cooperative organizations, especially credit unions.
Credit union leaders have been frightened by the challenges, and nearly overwhelmed by the complexities of information-era management. But they’ve genuinely come to appreciate the benefits of the cooperative business model.
Sourcing capital and fighting off the for-profit (bank) lobbyists are among many challenges.
All things considered, however, credit unions have come through the recession with strength, and they can now look to the future with a sense of unlimited opportunity. No longer will we look at the term “credit union” as a strategic anchor.
It turns out that the term “credit union” is a key point of differentiation. Consumers are learning that credit unions are wired to help them succeed.
MIKE MERCER is CEO of Georgia Credit Union Affiliates and CUNA chairman.